In re Holland

Decision Date02 August 2007
Docket NumberAdversary No. 06-1418.,Bankruptcy No. 04-18099-JNF.
PartiesIn re Annette M. HOLLAND, Debtor. Annette M. Holland, Plaintiff, v. EMC Mortgage Corporation, Defendant.
CourtUnited States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts

David G. Baker, Boston, MA, for Debtor/Plaintiff.

Meredith A. Swisher, Bernkopf Goodman, LLP, Boston, MA, for Defendant.


JOAN N. FEENEY, Bankruptcy Judge.


The matters before the Court are: (1) the "Application of Ablitt & Charlton, PC for Compensation as Counsel to Secured Creditor, EMC Mortgage Corporation," as supplemented; (2) the "Application of Shapiro & Kreisman for Compensation as Counsel to Secured Creditor, Washington Mutual Bank (Predecessor-In-Interest to EMC Mortgage Corporation)," as supplemented; (3) the "Application for Compensation and Reimbursement" filed by Attorney David G. Baker as counsel to the Debtor in this Chapter 13 case and in a prior Chapter 13 case; and (4) "Defendant EMC Mortgage Corporation's Motion to Dismiss Complaint" in which EMC Mortgage Corporation seeks dismissal of the Debtor's Complaint.

The matters emanate from a lengthy dispute among the Debtor, Annette M. Holland (the "Debtor"), and two of her prior mortgagees, EMC Mortgage Corporation ("EMC") and Washington Mutual Bank, FA ("Washington Mutual"),1 concerning substantial legal fees and costs assessed by them in connection with two foreclosure proceedings and three of her Chapter 13 bankruptcy cases.2 The Debtor or disputes the reasonableness of the amounts claimed by the mortgagee and has filed lengthy objections to the applications filed by counsel to EMC and counsel to EMC's predecessor, Washington Mutual. Additionally, the United States Trustee and the Chapter 13 Trustee have objected to the Application for Compensation and Reimbursement filed by David G. Baker ("Attorney Baker" or "Debtor's Counsel") ill which he seeks payment for services performed in the Debtor's pending Chapter 13 case, as well as one of her prior Chapter 13 cases. As an added wrinkle in the present case, the Debtor recently obtained a reverse mortgage and both her counsel and EMC have been paid. As a result, the Court must determine whether any amounts paid to the parties should be disgorged and remitted to the Debtor. Finally, the Court must determine whether to grant EMC's Motion to Dismiss the Debtor's five-count Complaint, which contains allegations that EMC violated, inter alia, the Real Estate Settlement Procedures Act of 1974.

With respect to the Applications filed by Shapiro & Kreisman and Ablitt & Charlton, PC, the Debtor challenges the reasonableness of the fees and disbursements claimed by the mortgagees. Nevertheless, the facts necessary to decide the reasonableness of those fees, costs, and charges, are not in dispute, and no party has requested an evidentiary hearing. Similarly, with respect to Debtor's Counsel's Application, no party requested an evidentiary hearing. Based upon the undisputed facts, the Court now makes the following findings of fact and conclusions of law in accordance with Fed. R. Bankr.P. 7052.

The Debtor objected to EMC's Motion to Dismiss. To prevail on its Motion to Dismiss, EMC must establish that the Debtor failed to plead plausible claims upon which relief can be granted. See Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). For the reasons set forth below, the Court finds that EMC sustained its burden with respect to four of the five counts set forth in the Debtor's Complaint.


The Debtor, a self-employed house cleaner earning approximately $3,400 per month from her business, social security, and retirement income, filed a voluntary Chapter 13 petition, her sixth Chapter 13 case in twelve years, on October 4, 2004 (the "Pending Case"). She has been represented by Attorney Baker since the commencement of her case. Attorney Baker also, represented the Debtor in one of her prior Chapter 13 cases, Case `No. 02-17758-CJK, which the Debtor filed on October 28, 2002 (the "2002 Case").

A. The 2002 Case

At the commencement of the Debtor's 2002 Case, Attorney Baker filed a "Disclosure of Compensation under 11 U.S.C. 329[sic] and Bankruptcy Rule 2016(b)" disclosing that he had been paid $1,000 and was to be paid $1,500 for representing the Debtor. In her 2002 Case, the Debtor disclosed on Schedule D-Creditors Holding. Secured Claims that Washington Mutual held a first mortgage (the "Mortgage") on her residence located at 90 Belnel Road, Mattapan, Massachusetts (the "Property"). At the time the Debtor filed the 2002 Case, she valued her Property at $155,000 and listed Washington Mutual as a secured creditor with a claim in the sum of $82,000. As discussed in more detail below, the Mortgage, which secured a note held by Washington Mutual in the original principal amount of $70,000, contains a provision which permits the lender to recover certain collection fees and costs from the mortgagor. In the 2002 Case, Washington Mutual timely filed a secured proof of claim on December 10, 2002 in the amount of $84,262.94. It later assigned its claim to EMC.

EMC and the Debtor litigated a number of issues in the 2002 Case. On May 8, 2003, EMC filed an objection to the Debtor's Chapter 13 Plan,4 which the Court sustained on June 26, 2003. On the same day, the Court ordered the Debtor to file an amended Chapter 13 Plan by July 10, 2003. Eighteen days later, after the expiration of the appeal period from the order sustaining the objection to confirmation,5 the Debtor filed a "Motion for Relief from Order Sustaining Objection to Confirmation" in which she averred that EMC's objection to confirmation was untimely. On July 24, 2003, the Court denied that Debtor's motion, stating that it had "heard and rejected these same meritless arguments previously." The Debtor appealed, filing both a Notice of Appeal and a Motion for Leave to Appeal.

While the Debtor pursued her appeal, she filed other plans to which either the Chapter 13 Trustee or EMC objected. On October 30, 2003, the United States Bankruptcy Appellate Panel for the First Circuit (the "BAP") issued its mandate denying the Motion for Leave to Appeal and dismissing the Appeal. On January 28, 2004, following the January 15, 2004 entry of the mandate on the Bankruptcy Court docket, the Debtor appealed the BAP decision to the United States Court of Appeals for the First Circuit. Five months later and before the First Circuit issued a decision, the Debtor and EMC entered into a Stipulation of Settlement (the "Appeal Stipulation"), dated June 28, 2004. The Appeal Stipulation provided in relevant part the following:

... Holland shall voluntarily dismiss this appeal without prejudice and without costs to either party on condition and in consideration of EMC forbearing from any actions to foreclose its mortgage during the pendency of any appeal during the present bankruptcy case, in which Holland is the appellant and EMC is the opposing party[.]

On August 19, 2004, the Court dismissed the Debtor's 2002 Case following the submission of an Affidavit of Non-Compliance by the Chapter 13 Trustee with respect to the Debtor's default under the terms of an Agreed Order requiring the Debtor to make monthly payments of $1,100.6 Notably, the Debtor proposed four Chapter 13 plans during the 2002 Case, none of which were confirmed. Debtor's Counsel did not file a fee application in the 2002 Case, and the Court never awarded him fees in excess of the $2,500 permitted by Massachusetts Local Bankruptcy Rules, Appendix 1, Rule 13-7(b).7

B. The Pending Case

As noted above, the Debtor commenced the Pending Case on October 4, 2004, approximately six weeks after the dismissal of her 2002 Case. The Court set February 8, 2005 as the bar date for filing proofs of claim.

On the petition date, Debtor's Counsel filed his "Statement Pursuant to FRBP 2016(b)" in which he disclosed 1) that the Debtor had paid him $3,315 for legal services in the 2002 Case, a sum in excess of the $2,500 he represented he was to receive in that case in the Rule 2016(b) Statement he filed on October 28, 2002; and 2) that the Debtor had paid him $2,500 for the Pending Case. In his 2016(b) Statement, Attorney Baker also disclosed that he intended to bill the Debtor at the rate of $200 per hour "for all services rendered during this case, including adversary proceedings and appeals, if any," noting that "[i]f the total fee exceeds $2,500, counsel may apply to the Court for approval of additional fees, in accordance with Local Rule." Attorney Baker did not represent that the Debtor owed him any fees for the 2002 Case, and he did not indicate that his $200 hourly rate was subject to increase.

In addition to the Statement, Debtor's Counsel also filed a "Chapter 13 Agreement Between Debtor and Counsel" in which he disclosed the following:

Initial fees charged in this case are $2,500.00. Prior to filing the case, the debtor has given the attorney a check for $10,264.00, representing a refund from the Chapter 13 Trustee from the debtor's prior case. The attorney will pay $5,000 to himself for the prior case and the present case. The balance shall pay the filing fee for this case and the remainder will be paid to the Chapter 13 Trustee for the present case. If the initial fees are not sufficient to compensate the attorney for the legal services rendered in this case, the attorney further agrees to apply to the court for additional fees where required by Local Rule.

(emphasis in original).8 In the Debtor's Statement of Financial Affairs, Item 9, "Payments related to debt counseling or bankruptcy," the Debtor listed a payment to Debtor's Counsel on September 21, 2004 in the amount of $5,000. The Debtor did not list any fees owed to Debtor's Counsel in her schedules; Debtor's Counsel did not file a proof of claim in the...

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